Germany in recession: In April, industry received around ten percent fewer orders than a year ago. Picture Alliance
German industry is under constant pressure. Their production fell in May, and incoming orders are well below the previous year.
In the energy-intensive sectors such as chemicals and metal, production is 12.4 percent below the previous year – although energy is cheaper again.
Deutsche Bank fears that the economic recovery after the recession is already “stalling” again. The gross domestic product could even have shrunk again in the spring.
German industry is under stress. Their production is stagnating, orders are weakening and the energy-intensive industries are not recovering from the deep trough caused by the Ukraine war. This is a problem for Germany, because the fourth largest economy in the world has a particularly high proportion of industry. Economists at Deutsche Bank fear the post-recession recovery may stall before it really gets going. Gross domestic product (GDP) may have shrunk for the third quarter in a row in the spring.
In May, production was 0.2 percent below April. Compared to the same month last year, the output was only 0.7 percent higher, that shared Federal Statistical Office with. Even if you look at the three-month period, growth is weak: from March to May, production was only 0.2 percent higher than in the three months before.
As a result, there was no recovery in the spring. Germany’s economy shrank in the two winter quarters and is therefore in a recession. The statisticians will present the first figures for economic growth in the second quarter of 2023 at the end of July. The chief economist at Deutsche Bank Research, Stefan Schneider, expects GDP to have risen by at best 0.1 percent compared to the previous quarter. “If the June data is weak, there could also be a renewed decline in GDP.”
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“The risk of a standstill is increasing significantly”
And there are increasing signs of a weak June. With the Ifo business climate and the ZEW economic expectations, two important indicators for the German economy are pointing downwards. Economist Schneider points out that the ifo business expectations in the auto sector have fallen to their lowest level since December 2008. Other indicators such as the truck toll index also fell in June. This is an “indication that production may have been rather meager in the last month of the second quarter”.
“The risk that the recovery will come to a standstill has increased significantly,” says Schneider.
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There are clear differences within the industry in May. On a monthly basis, the pharmaceutical industry and power generation in particular developed negatively. In contrast, the car manufacturers increased production by almost five percent.
Since Russia’s attack on Ukraine, the particularly energy-intensive areas of the German economy have been worth a special look. These include the chemical, metal, mineral oil, paper, glass and ceramics sectors. Their production fell again in May by 1.4 percent. This was still 12.4 percent below the level of the previous year.
So far, industry in Germany has even been supported by full order books. The companies are still processing orders that were left behind during the delivery bottlenecks in the corona pandemic. It is therefore worrying that the number of new orders is weakening.
In May, incoming orders were still 6.4 percent higher than in April. However, special effects from large orders play an important role. In comparison to the previous year, incoming orders were 4.3 percent lower.
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